This chapter is from the book

This chapter is from the book

I am on the North Carolina coast today, and I am surprised to learn that more than 2,000 shipwrecks have occurred off these coasts. Why so many? Hurricanes, treacherous shoals, unpredictable weather, and war caused the majority of the wrecks. My family and I rented jet skis and went exploring around the area to check out and learn about the history. It was neat to see how many other captains had "learned" about the ways to predict and avoid such hazards in the area and were able to successfully reach the North Carolina shore.

In the same way, this final chapter helps companies create a plan for their journey toward innovation. A set of guiding principles and goals is the focus of this chapter as you continue your flex-pon-sive* journey.

Growth, Business Flexibility, and Innovation Are the Results of a Flex-pon-sive* Company

In some ways, today's business environment is similar to the Internet era, when in the rush to embrace the Internet and to get a competitive edge, companies became preoccupied with e-commerce. In fact, instead of imagining a hybrid world, everyone said that "clicks would replace bricks" and that retail would be changed forever. Others thought that it was about more than transactions; they saw the larger vision of e-business. E-business was a new way of doing business. You can see the similarities to where we are today—the rush to adopt emerging technology and the misconceptions that business changes suddenly instead of gradually.

And today there is a bigger world emerging on the horizon. From the work that IBM has been doing with business leaders and from its client engagements, they have produced a study by the Institute for Business Value (IBV) on the business value of flexibility and SOA in this new world. The results showed that those companies moving to the flex-pon-sive* world were seeing the results in flexibility from SOA; 97% justified their first SOA project based on cost, 100% saw increased business flexibility, and 51% showed increased revenue growth. The 30 customers who produced these results are plunging into today's innovative and flex-pon-sive* world with an understanding that was lost in the e-business world. This new model requires that businesses change, but at an incremental pace. This study complements the CEO study that we analyzed at the start of this book, which showed that companies were primarily pursuing growth again and only secondly cost-cutting. Since that study was completed, competitive pressures have only increased—due to advances in technology, the rapid advent of globalization, and the consequent flat world. If there's any change, it's the insertion of an important qualifier—profitability. Profitable growth is now at the top of the list.

And in a follow-up study, our recently released Global CEO Study 2006, 765 CEOs in every major industry told us that the pressures to achieve profitable growth had introduced a new mandate—the need to innovate:

Two-thirds of the CEOs believe their organizations will need to introduce fundamental, radical changes in the next two years to respond to competitive pressures and external forces.

Fewer than half say they've managed this magnitude of change successfully in the past.

With the growing sophistication about how and where innovation occurs, companies know that business flexibility is the driver. New ideas don't just come from inside their company, but from wikis, blogs, partners, customers, and even competitors. This world requires collaboration to solicit the ideas and flexibility to respond to those ideas. The insight is that CEOs now say that more of their ideas for innovation come from partners and clients than from their own employees.

The interesting commonality here is that all these new ideas come from some sort of collaboration, but to act on those ideas, business flexibility must be a number-one priority.

Among all the CEO areas of focus we examined, business flexibility and collaboration showed the clearest correlation with financial performance, whatever the financial metric—revenue growth, operating margin growth, or average profitability over time. Beyond product or service innovation, more CEOs are looking to business process innovation as a key competitive advantage. As one CEO put it, "Products and services can be copied. The business process and the model is the differentiator." Another CEO commented that new product introductions in his industry offered only one month of market exclusivity before they are duplicated in the marketplace.

This whole discussion is key because it shows that a few of the top areas we need to tackle are the alignment of business and IT, especially around joint goals, and a focus on those processes that will allow companies to differentiate themselves.

This book helps address these key questions:

What are your company's business goals, and how do you align your whole company, including business and IT, around those goals?

What governance mechanisms and mandates do you have in place to drive those goals throughout your corporation? Chapter 6, "SOA Governance and Service Lifecycle," addressed how to think through governance, one of the most important indicators for success.

What flexibility and innovation are needed for those goals to be reached?

What business processes need innovation to be successful? Chapter 3, "Deconstructing Your Business: Component Business Model," detailed one method to determine the core processes that you should focus on for success.

How does your company create an environment of innovation and the power to act upon it?

A company cannot continue to succeed if it comes up with some superb ideas through powerful focus and collaboration, but fails to act upon them or is not flexible enough to respond quickly to market forces. Governance and a focus on the right processes coupled with flexibility to act are all critical for a flex-pon-sive* company.

So the bottom line is that companies must have change to innovate. Given that every business is so tied to technology, this conclusion places a premium on the underlying technology that runs your company.